Accounting Study Set 8

Business

Quiz 10 :
Fixed Assetsandintangibe Assets

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Quiz 10 :
Fixed Assetsandintangibe Assets

Fixed assets are those assets which are purchased for long term and which cannot be converted into cash in short time period. These assets are purchased for use in business operations to generate revenues for a company and have a long life. Act of Dave is against office ethics. Office ethics is a relative code of conduct within the office premises. These are the policies and code of conduct and practices a person should follow in the office premises. Thus office ethics states that a company's employee should work in the best interest of a company and thus is liable for any harm caused to company by his deeds. Doing personal work and wasting office hours for personal work is considered unprofessional. Using work time to conduct personal businesses such as done by Dave. These behaviors might lead to restriction on use of office assets for personal use even in case of emergence. Such behavior may also lead to termination from the duties of office and on the same time it is not proper for the clients to call him during the office working hours as such calls may create disturbance in normal conduct of service which lead to wastage of company's resources. Thus Dave is not performing in a professional manner by using company's asset for his personal side business.

a. Fixed assets are the assets that normally last for one year and are used in the normal operation. Here, O'Neil office supplies is holding automobiles trucks for normal operation and doesn't intend to sell them in short run. Hence, they shall be classified as fixed assets. b. Inventory is the current asset that is held by a company for selling to customers to earn revenue. Here, Collins Auto Sales co is holding automobiles trucks for sale and this is the core activity of the company. Hence, they shall be classified as inventory.

Fixed assets Fixed assets are assets which are long term assets that is generally used by company for more than one year and these are assets are required in the operation business of company that is they have in generating revenue for business. All costs which are directly related to acquiring the fixed costs and are in nature of one-time cost which enhances the productivity of assets are capitalized in the asset account that is debited to asset account which would increase cost of the assets. A. 1. Fee paid for installation of printing press is directly related to acquiring the printing press and so it is debited to the asset account. 2. Freight cost is transportation cost incurred for printing press and is directly related to printing press and therefore this cost is debited to asset account. 3. Insurance while in transit is required for printing press and directly related to printing press and therefore this cost is debited to asset account. 4. New parts to replace those damaged in unloading is not directly related to acquisition of printing press and therefore this cost is not debited to asset account. 5. Sales tax on purchase price is part of cost of printing press and therefore, this cost is debited to asset account. 6. Special foundation cost is related to printing press and directly related to acquisition of printing asset and therefore this cost is debited to asset account. B. 7. Fees paid to attorney is for reviewing the purchase agreement of purchase of old printing press, this cost is incurred because company has purchased old printing press and therefore this cost is directly related to printing press and therefore this cost is debited to asset account. 8. Freight charges incurred is for bringing the old printing press to company's premises and is directly related to purchase of old printing press and so this cost is debited to asset account. 9. Installation of printing press is required for using the printing press by company and is directly related to old printing press and therefore this cost is debited to asset account. 10. Repair of damage does not increase the productivity of printing press and is incurred in normal process of printing press and not this cost is not debited to old printing press. 11. Replacement of worn out parts is for enhancing the use of printing press and is directly related to printing press and therefore this cost is debited to asset account. 12. Vandalism repairs during installation is regular costs incurred which does not enhances the productivity of old printing press and therefore this cost is not debited to asset account.

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